Would you do this deal?

1 Reply

I will be providing the cash for a builder and project manager in Atlanta, who has flipped over 500 homes in the area. We will be governed by an Operating agreement but generally, he will handle the project from start to finish and I will be hands off for the most part. Being that I will only supply the capital and not labor will allow me to dodge the additional Self-Employment tax. We split profits 50/50. Below are high-level numbers and info. I have altered the numbers to make the deal hypothetical, but percentages stand true. 

If I do not finance the deal with cash I have access to a 3.5% Portfolio Loan. 

-Purchase Price $347,500 

-Renovation $125,000

-Closing Costs $3,000

-Cash Outlay $475,500 (owed by investor)

-Sale Price $599,000

-Gross Profit $123,500

-RE Commission $29,950

-Net Profit $93,550

-Investor Return $46,775 in 6 months or 20% return Per Annum. We will aim to get this one renovated in 3.5 months and on the market at the end of Jan 2018. 

I know plenty of individuals using the 50/50 split between money guy and labor guy. I've always thought it was fair. 

20% return on a flip is also pretty standard. I'd do the deal, assuming the numbers are correct. You may want to get a 2nd, unbiased opinion on whether the ARV/rehab numbers are correct.

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